Valdai Club

Isolating Russia to destroy its economy, financial system, and currency failed as the world is no longer Western-centric. Economic sanctions united US adversaries such as Russia, China and Iran, while non-aligned states and partners such as India, Turkey, and Saudi Arabia have diversified their economic connectivity to reduce dependence on the West, writes Valdai Club expert Glenn Diesen.

The sanctions against Russia have altered the processes of globalisation and thereby even changed the world order. The consequence of unprecedented sanctions is that Russia has largely been severed economically from Europe, while the US has restored hegemonic control over its NATO allies. Although the wider world outside NATO has moved in the opposite direction – US adversaries have united, and neutral/non-aligned states are also reducing reliance on the US to adopt multipolarity. The consequence is that the European order is defined by a post-Westphalian hegemonic order under US administration, while the rest of the world is moving with great speed towards a Westphalian world order based on a balance of power among sovereign equals.  

 
The revisionist efforts to replace the Westphalian world order

The Peace of Westphalia in 1648, which laid the foundation for the modern world order, abandoned the aspirations of a hegemonic system in favour of a balance of power among sovereign states. The system demanded pragmatism as permanent alliances would obstruct the ability to balance states aspiring for hegemony. Sovereign equality was ensured by departing away from substantive laws based on diverse social norms that created overlapping sovereignty and enabled arbitrary decision-making as the more powerful states could justify dominance on their unique values. The Westphalian system is based on procedural agreements based on uniform rules that apply equally to all states as sovereign equals, which laid the foundation for modern international law.

The Westphalian world order has been undermined by the hegemonic ambitions of actors such as Napoleon, Hitler, and post-Cold War America. Over the past 30 years, Washington has been a revisionist actor by rejecting the Westphalian world order of a balance of power and sovereign equality. In Europe, this involved abandoning the agreements for an inclusive pan-European security architecture as outlined in the Charter of Paris for a New Europe (1990), because the key principles were a Europe without dividing lines based on sovereign equality and indivisible security. The alternative of NATO expansionism was instrumental to advance a hegemonic order based on sovereign inequality. The pre-Westphalian formula of sovereign inequality between Catholics and Protestants has been reconstructed as sovereign inequality between “liberal democracies” and “authoritarian regimes”. Sovereign equality under international law has been replaced by sovereign inequality under the “international rules-based order” in which the collective West can cite liberal values to arbitrarily interfere in domestic affairs, topple governments, invade, and change international borders.

The “international rules-based order” has been appealing to the Europeans under the pretence of establishing a US-EU collective hegemony under the auspices of NATO. Although, the vast majority of the world seemingly does not want to live under US hegemony and sovereign inequality under the arbitrary “rules-based international order”.

Sanctions cement US hegemony in Europe but incentivise a global balance of power

US global primacy depends on preserving the Cold War alliance system as it ensures that allies are dependent, and adversaries are contained. Phrased more colourfully by Zbigniew Brzezinski, the durability of US hegemony depended on the ability “to prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected, and keep the barbarians from coming together”.

The rigorous sanctions against Russia and the attack on the Nord Stream pipelines have largely severed Russia from Europe, and resolved Washington’s historical misgivings about the integration between the German and Russian economies. Bloc discipline has subsequently been restored in Europe after years of the EU pursuing an equal partnership with the US and objectives such as “strategic autonomy” and “European independence”.

However, isolating Russia to destroy its economy, financial system, and currency failed as the world is no longer Western-centric. Economic sanctions united US adversaries such as Russia, China and Iran, while non-aligned states and partners such as India, Turkey, and Saudi Arabia have diversified their economic connectivity to reduce dependence on the West. 

The Western sanctions restricted access to key technologies, industries, banks, the SWIFT payment system, insurances, and even seizing/stealing the money of the Russian central bank. The arbitrary seizure of assets from Russian individuals without due process demonstrated that the rule of law is partly suspended. Trust in the West’s administration of the global economy is subsequently collapsing around the world. The sanctions and threats of secondary sanctions have forced the rest of the world to develop a new international economic infrastructure. More than 85 percent of the world’s population have not joined the sanctions and are instead intensifying economic integration. The world is therefore scrambling to diversify supply chains, technologies, currencies, payment systems, trade routes, insurance systems, and other sources of the West’s exorbitant economic instruments of power.

The loss for Europe becomes a gain for Eurasia. In the unipolar world sanctions can choke and destroy the economy of an adversary, although, in a multipolar world, sanctions entail surrendering market share to other centres of power. Energy is the lifeblood of industries, and for decades cheap Russian energy fuelled European industries. In return, Europe exported its technologies and industrial goods to Russia.

Europe cut itself off important markets and became more dependent on the US, while the rest of the world diversified economic connectivity and could thus assert greater political sovereignty as independent poles of power.

Learning to live without the West 

The sanctions against Russia have intensified the development of a multipolar system by creating a demand for a new international economic architecture. China unavoidably has a greater role in the multipolar international economy by offering leading technologies, industrial goods, and new financial instruments to supplement its Belt and Road Initiative.

India has integrated its economy much closer to Russia over the past year. One year ago Russia’s export of crude oil to India was absent, yet by November 2022 Russia became India’s leading oil supplier. With the International North-South Transportation Corridor (INSTC) linking Russia, Iran, and India – the economic integration will continue within technologies, industry, transportation, and finance. India and Russia are even contemplating the construction of oil tankers and the development of energy insurance companies to permanently immunise themselves from the West’s economic coercion. The economic influence it took the West centuries to build falters, and the ability of Washington to pressure New Delhi into a US-led alliance diminishes.

Russia’s refusal to accept dollars and euros for its energy exports is escalating de-dollarisation, a trend that both adversaries and allies of the US have joined. De-dollarisation spreads as China and India increasingly trade with Russia in their own currencies, and they have also established yuan and rupee settlement mechanisms with the wider world. China and Saudi Arabia are seemingly negotiating to trade oil in yuan in what can be considered a severe blow to the petro-dollar system. There are talks within the BRICS to establish a new common currency for trade. The genie is out of the bottle, and even Brazil and Argentina are discussing the development of a common currency.

New economic institutions are also widening their membership and deepening their economic competencies. A long queue has formed of countries seeking to join both the Shanghai Cooperation Organisation (SCO) and BRICS. Iran will soon become a SCO member, while Saudi Arabia, Qatar and Bahrain have applied to join the organization. Even Turkey, a NATO member, announced it will seek SCO membership. Argentina, Algeria, and Iran have applied for membership in BRICS, while Egypt, Saudi Arabia, Turkey, and Indonesia have expressed their intention of applying. The Russian-led Eurasian Economic Union also continues to increase its free trade zone agreements. The aforementioned international institutions include a large portion of the world’s population, resources, economy, and energy resources.

Recruitment of non-European states to join sanctions against Russia have failed spectacularly. China and India insist on preserving an independent foreign policy irrespective of economic threats from NATO states. When the US requested its long-standing strategic ally Saudi Arabia to increase oil production to replace European reliance on Russian oil, Saudi Arabia responded by instead importing Russian oil for domestic use to export their own oil. China is also selling its excess Russian LNG to Europe – at a markup. In August 2022, US secretary of state Anthony Blinken was very publicly rebuffed in South Africa, a BRICS member, on a tour to convince Africa to isolate Russia. Seated next to Blinken at a press conference, the South African Minister of International Relations Nalendi Pandor accused the US of “bullying” and threatening Africa to follow Western dictates. To the great ire of NATO, South Africa hosted a joint military exercise with Russia and China in February 2023.

Globalisation under Eurasian Westphalia

A fragile hegemony is established in Europe, although the rest of the is multipolar and pursuing a balance of power among sovereign equals. The sanction against Russia has weakened Europe’s position as it is now in an extremely asymmetrical partnership with the US and has diminished influence across the world. A far cry from the collective hegemony promised by NATO expansionists. Washington’s abuse of its administrative role in the international economy is compelling the world to diversify economic connectivity and thus undermine US hegemonic ambitions.

The economic balancing of the US and the collective West indicates that the Westphalian world order is reasserting itself. There are plenty of problems with Eurasian integration, mistakes will be made, and many plans will not translate into actions. However, the processes are in place to restore the Westphalian world order - but with Eurasian characteristics.